The Income Tax Appellate Tribunal (ITAT), Visakhapatnam held that disallowance u/s14A is not required when assessee has not earned any exempt income.
The assessee, Sri K V Madhava Verma, being an individual filed his return of income for the AY 2012-13 and 2013-14 on 30/09/2012 & 29/09/2013 declaring a total income of Rs. 23,98,250/- and Rs. 20,31,280/- respectively for the relevant assessment years. Subsequent to the summary assessment, the case was selected for scrutiny under CASS and the statutory notices U/s. 143(2) and 142(1) of the Act were issued and served on the assessee. The AO after considering the submissions made by the AR of the assessee, concluded the assessments by making additions of Rs. 5,22,70,600/- and Rs. 1,66,64,987/- for the AY 2012-13 and 2013-14 respectively.
Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A), Visakhapatnam. The CIT(A) considering the submissions and additional evidence made by the assessee, partly allowed the appeal. Aggrieved by the orders of the CIT(A), the Revenue is in appeal before the Tribunal.
The AR submitted that since the assessee has not earned any exempt income during the relevant assessment year and hence disallowance under Section 14A and 8D is not warranted. The AR also pleaded that the order of the CIT(A) be upheld whereas the DR relied on the order of the AO.
The Bench consisting of held that “We find from the record that the assessee has not earned any exempt income to invoke the provisions of section 14A and 8D of the IT Rules, 1962. Various High Court and Coordinate Benches of the Tribunal have laid down the ratio that there is no requirement for disallowance U/s. 14A of the Act where the assessee has not earned any exempt income. We, therefore respectfully following the judicial precedents on this issue, find no infirmity in the order of the CIT(A), and this ground raised by the Revenue is dismissed.”
The Counsel for the assessee is GVN Hari and the Counsel for the Revenue is SPG Mudaliar.
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